Machine Cover developing parametric pandemic coverage
Machine Cover, a technology company that creates parametric products for the insurance industry, is developing what it believes to be the world’s first pandemic insurance product based on parametric triggers.
The Boston-based company said the COVID-19 crisis had revealed a critical gap in insurance cover after insurers confirmed many business interruption policies do not cover medical pandemics.
The parametric product is being designed to be used as an add-on to business’ existing commercial policies. It will automatically pay out in circumstances where there is a very significant decline in economic activity, with payouts triggered by a number of defined events. If the policy is triggered as a result of the agreed parametric measure, businesses will receive a prompt and automatic pay-out without the need to make a claim.
The pandemic product is expected to be available from Q1 2021. It could be distributed exclusively through a single carrier, or through multiple insurers who could then offer it as an add-on product when selling commercial insurance to their clients, Machine Cover said.
Inder-Jeet Gujral, founder and chief executive at Machine Cover, said: “Our product uses parametric triggers to determine when there is a significant drop in economic activity in a given area – it could be caused by a pandemic, a large factory closing, or major road-building activity, we don’t mind – and the policy-holder will be automatically paid an agreed amount.”
Gujral said the product will give businesses what they thought they were getting with their existing business interruption policies before the COVID-19 pandemic.